China’s Economy: Economists keep getting China wrong — here’s why
I’m not an economist, but I am an observer of people and their behaviors, I’m also very interested in how China is governed. I have a little interest in psychology and a lot of interest in China’s governance and these give me a different perspective on the future. I look at what people are doing, how they are acting and how the government handles problems and, more importantly I look at my friends and neighbours in China to get the feel for what’s likely to happen.
So, my predictions don’t match the economist’s predictions: in a few months, you can look back at this and tell me if I was wrong or if I got anything right.
For over 20 years we’ve been hearing about the imminent collapse of China, many books have been written about it. If we go back in time, particularly over the last couple of years we’ll see predictions varying from the slowing Chinese economy to its complete collapse.
Currently, there’s a lot of negativity, both inside and outside China. I met a friend the other day and he told me they weren’t having job fairs at his university this year because there aren’t any jobs. Graduates are leaving and becoming immediately unemployed. The World Bank predicts a 2022 slow-down. Bloomberg News, using many different analyses, suggests that China’s growth due to “Covid Lockdowns” will slow. So, on the surface it all seems quite negative. Except, I disagree.
Over the last few years that I’ve been paying attention, I’ve noticed that China keeps defying the odds. Go online and type the words: “China’s growth higher than expected” and you’ll see what I mean, there are many articles from last month, last year and even going back several years proving that the predictions were wrong.
Why do they keep getting it so wrong? In my opinion, there are three reasons:
One is that they want it to be lower and since all the indicators show that it might happen, they make the predictions which perhaps push potential investors away and their predictions become reality. Except the investors aren’t being pushed away. Like me, they seem to know things the economists don’t know.
Two is that they haven’t considered the collective culture and nationalism of Chinese people, for example, as soon as Wuhan came out of its major lockdown in 2020, million of dollars of domestic money poured into the region, Shanghai will experience the same. This re-stimulates the economy, and rewards locals for their sacrifice. It created domestic markets where people said: I’ll buy that because it’s from Wuhan.
Three is because of specific and targeted government policies. China Daily reports that government policies were a major factor. Shopping vouchers given to individuals, cash incentives to households, tax relief and rent relief to businesses all contributed to helping the economy back on track. Infrastructure projects that were planned for future dates were brought forward and Wuhan’s economy bounced back, faster and stronger than anticipated.
Once again negative reports indicated the growth was slow and unsteady, there were, of course, setbacks, the major floods of 2021 set everything in Central China back but a very interesting side news that economists didn’t pick up on was that, while they correctly noted the number of passengers in Wuhan’s 21 line Metro System was down and saw this as a sign the economy wasn’t improving, people weren’t going to work and it was all doom and gloom.
What they didn’t note was the connection to another economic measurement: the number of car sales was up. People, were still going to work, but it seemed they preferred to travel by car rather than sharing public transport. A cultural and unexpected effect of the virus that added a boost to the economy, those cars require fuel, maintenance, insurance, new drivers need training and licences. All this money was spent in the city and helped growth in an unexpected way.
Another negative report which drives reporters to conclusion which may not be accurate is the unemployment figures. There’s no doubt they are higher than wanted and no doubt that they’re higher than projected but once again, this doesn’t spell disaster for China.
First of all, comparing China’s unemployment rate to those of places like the UK, USA and Australia isn’t a valid comparison. Recently China legislated to protect “gig workers” such as drivers and food delivery workers, instead of a delivery fee for their work, these people now have full-time jobs with protections. In other countries many jobs are part time, gig work and don’t have a fixed income. So, in those places, you may have work, but you don’t have a living income. A low unemployment rate doesn’t mean much to people who are working but still hungry.
There’s also a huge e-commerce industry booming in China, millions of people are making a living by selling online, influencing online and these people aren’t in the jobforce, but they’re gainfully and, in some cases, very lucratively employed.
What it also means is that China’s government needs to act, and act decisively, something they can do and are already doing. As recently as the end of May China’s Premier, Li Kejiang hosted a meeting of more than 100,000 government officials and business leaders to discuss this very subject: “The scale and format of this meeting underscores China’s institutional strength…” reported Global Times. The outcome of the meeting is a 33-point stabilisation policy which includes intensive measures to resume and continue work as well as protect employment while ensuring pandemic prevention does not interfere with social development.
The greatest point about this is that 100% of those officials are in the same party and will work towards the same goals rather than vote against them. And this is why reading indices, looking at measurements and not understanding the country’s culture, its people or its governance, economists and China watchers keep getting it wrong.